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On January 1, 1975 , Dickson Energy Corp had 18,000, non-cumulative preferred shares and 132,000 common...

On January 1, 1975 , Dickson Energy Corp had 18,000, non-cumulative preferred shares and 132,000 common shares issued and outstanding. Dickson reported profit of $480,000 in 1975 and declared preferred dividends of $5,000 during the year. The following transactions changed the number of shares outstanding during the year ended December 31, 1975 .
April 1 Issued 24,000 common shares for cash.
July 1 Issued 6,000 common shares for cash.
October 31 Reacquired 12,000 common shares.

Required:
a. What is the amount of profit available for distribution to common shareholders?
b. What is the weighted average number of common shares outstanding for the year?
c. What are the earnings per common share for the year?

Solutions

Expert Solution

a. Profit available for distribution to common shareholders = Net Income - Preferred Dividends

= $480,000 - $5,000 = $475,000

b. Computation of weighted average number of common shares outstanding:

Date Particulars Shares Portion of the months outstanding Total Months Weighted Shares
a b c d=a*b/c
Jan. 01 Opening Balance    132,000 12 12                     132,000
April. 01 Issued      24,000 9 12                       18,000
July. 01 Issued        6,000 6 12                         3,000
October. 01 Reacquired    (12,000) 3 12                       (3,000)
Total Weighted average no of common shares                     150,000

c. Earning per share = Profit available for distribution to common shareholders/Weighted average no of common shares

= $475,000 / 150,000 shares = $3.167 per share

ekkarill92 answered 2 years ago
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